Good evening and welcome to Raymond James Financial's Fiscal 2024 Fourth Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristie Waugh, Senior Vice President of Investor Relations and thank you for joining us. With me on the call today are Chair and Chief Executive Officer, Paul Reilly; President Paul Shoukry; and Chief Financial Officer, Butch Oorlog. The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to slide 2. Please note that certain statements made during this call may constitute forward-looking statements. These statements include, but are not limited to information concerning future strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions, and our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments and general economic conditions. In addition words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future, or conditional verbs such as may, will, could, should, and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, which are available on our website. Now I'm happy to turn the call over to Chair and CEO Paul Reilly. Paul?

Thank you, Kristie. Good evening and thank you for joining us today. Before I discuss our fourth quarter and fiscal year earnings, I want to start by acknowledging the heartbreaking devastation our associates, advisors, friends and neighbors experienced over the last several weeks. With hurricanes Helene and Milton impacting communities throughout the Southeast including the St. Petersburg Tampa Bay area where Raymond James is headquartered as well as the Carolinas and Georgia, thousands across the region experienced unprecedented flooding, power outages, property damage and devastation. We enacted our business continuity plans and with our service workforce almost equally distributed across offices in St. Pete, Memphis and Southfield Michigan, colleagues outside impacted areas stepped in to ensure continuous service coverage. Even those affected associates and advisors continue to serve clients while facing storm and evacuations often working remotely from safe locations. The storm left a long recovery road ahead of us for all in their path. And while it's been difficult to bear witness to the pain and loss, I have also been humbled by the resilience of our associates, advisors and our community. Following the hurricane, the firm and leadership team have contributed almost $11 million to associate and community relief, including stipends to eligible associates and donations the Friends of Raymond James, the American Red Cross, United Way Suncoast and other charitable organizations across impacted communities. In addition to granting associates the time needed to navigate recovery efforts, the firm continues to provide comprehensive resources and benefits, including information about financial support, immediate aid, relocation services and wellness benefits. Challenging times like these highlight the importance of always putting people first, which has always been the foundation of Raymond James. The preparation, perseverance and response to the storm reflect the long history of Raymond James service culture and I'm…

Thank you, Paul. Turning to slide 10. Consolidated net revenues were a record $3.46 billion in the fourth quarter, up 13% over the prior year, and up 7% sequentially. Asset management and related administrative fees grew to $1.66 billion, representing 15% growth over the prior year, and 3% over the preceding quarter. This quarter PCG domestic fee-based assets increased 7%, which will be an approximate 6% tailwind for asset management and related administrative fees in the fiscal first quarter. Brokerage revenues of $561 million grew 17% year-over-year, primarily due to higher brokerage revenues in PCG and fixed income capital markets. I'll discuss account and service fees and net interest income shortly. Investment Banking revenues of $315 million increased 56% year-over-year, and 72% sequentially. Fourth quarter results benefited from a significant increase in M&A revenues. Moving to slide 11. Client domestic cash sweep and enhanced savings program balances ended the quarter at $57.9 billion, up 3% compared to the preceding quarter and representing 4.2% of domestic PCG client assets. So far in the fiscal first quarter, domestic cash sweep balances have declined about $1.3 billion attributable to record quarterly fee billings. Turning to Slide 12. Combined net interest income and RJBDP fees from third-party banks was $678 million, up 1% over the preceding quarter. The bank segment net interest margin was down two basis points to 2.62% for the quarter, while the average yield on RJBDP balances with third-party banks decreased seven basis points to 3.34%, primarily due to the Fed rate cut. Based on current rates and balances, which reflects the September rate cut and the impact of quarterly fee billings, we would expect the aggregate of NII in RJBDP third-party fees to be down approximately 5% in the fiscal first quarter. Keep in mind, there are a lot of…

Thank you, Butch. You definitely covered the financials a lot better than I did when I was a CFO. Great job. Now on to our outlook. We are pleased with our record results this quarter and for the fiscal year. More importantly, we are well positioned entering fiscal 2025 with record client asset levels, healthy pipelines for growth across the business and ample capital and funding to support balance sheet growth. In the Private Client Group, next quarter's results will be positively impacted by the sequential increase of assets and fee-based accounts, which we expect will benefit asset management and related fees by approximately 6%. Our advisor recruiting activity remains robust, and we're encouraged by the number of large teams joining us and remaining in the pipeline. We are focused on being a destination of choice for current and prospective advisors, which we believe over the long-term should continue to drive industry-leading growth. In the Capital Markets segment, we were pleased to see significantly improved results this quarter as the market environment became more constructive for investment banking results and particularly M&A. Our M&A pipeline remains healthy, and we are optimistic that the consistent investments in our platform and people should continue to drive growth in fiscal 2025. And in the fixed income business, the market is still challenging, but we've begun to see some improvement in the depository sector of our business. With short-term rates decreasing and the yield curve steepening, depository clients are starting to be more engaged in managing their securities portfolio. Overall, despite the headwinds over the past two years, we believe our long-term patient approach along with opportunistic investments we've made have well positioned us for growth as the market and rate environment become more conducive for the Capital Markets segment. In the Asset Management…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Michael Cho with JPMorgan. Please go ahead.

Hi, good evening team. Thanks for taking for my question. I just wanted to touch on the Capital Markets segment here. I apologize in advance a two-parter. But clearly a nice pickup as you noted in the advisory segment. Can you give any color or anything incremental in terms of maybe what you saw in the quarter or what -- and if there's anything in particular that drove the quarterly results in advisory? And maybe anything more on the pipeline as you look ahead as well? And then secondly Paul, if you kind of talk through you've invested in people and platform in this business over the last number of years. And so when we think about operating leverage ahead, I mean is there a way to frame the incremental margins ahead maybe relative to maybe what you've achieved in prior environments of better capital markets activity?

Well, first I think the whole market is pretty much shown an improving M&A environment and I think it's rate expectation and frankly a lot of capital on the sidelines. So, we had a big pickup this quarter, but we're seeing that both in activity in this current quarter coming up. So a lot of bigger transactions it's a lot of people who have been on the sidelines sort of reached deals to close them. So in terms of activity we could go by a number of MDs. We'd have to speculate with what the rate is. Certainly, I think we've had a year -- a couple of years ago that's hard to beat the benchmark because it was an exceptional year. But we've got room to grow from here. And I wouldn't really put a number on it yet, but we've got a lot of productive capacity.

As far as the margin goes, the margin portion of your question, for the year is 20.6%. And that's a pretty healthy margin, given the mix of businesses that we're in. Now capital markets really wasn't hitting on all cylinders until this past quarter's final quarter of the fiscal year. But we have puts and takes in our businesses. So I'd say over time, our goal has always been to grow revenues faster than expenses and therefore, grow earnings and margins beyond that. But in any one quarter, any one year, there could be a lot of puts and takes in our various businesses.

Okay. Wonderful. Thank you. And then just a quick follow-up on the balance sheet. I know you had a willingness or the willingness to ultimately grow the balance sheet and you've called out that corporate loan growth, particularly has been somewhat tepid. I'm just curious what you're hearing from clients and what ultimately drives more demand area, if it's really just simply lower rates or if you're hearing anything else in terms of that that piece of business? Thank you.

On the corporate side lower rates would certainly help, as companies take advantage of the debt that they could get at more attractive rates. But also going back to your last question to Paul, M&A activity historically has been a big driver of financing needs. And so as we start seeing M&A activity pick up, hopefully that will be a leading indicator for corporate loan demand over time.

Great. Thank you.

Your next question comes from the line of Dan Fannon with Jefferies. Please go ahead.

Good evening. Thanks for taking my question. Curious on your outlook for next year with the non-comp expense you came in slightly below the 1.9 for fiscal 2024. Could talk about the areas of investment and maybe quantify growth in that non-comp, as you think about the next 12 months?

A lot of our non-comp items, as we've said in the past is really growth related, so investment, advisor, sub-advisory fees for example that grows with fee-based assets which have been growing really nicely, 7% sequentially as an example. And then the other expenses, we're going to continue to invest heavily in technology. If you look at it on a percentage basis, that's been our biggest grower consistently year in and year out and on an absolute dollar basis for that matter. And that's really to remain competitive and provide advisors the very best technology that we can, very competitive in the industry to help them find time and serve their clients more efficiently and effectively. And so technology will continue to be an area of focus. And then of course, as you grow as an organization and grow the businesses, you're going to need to grow the branch and office space and other aspects of non-comp to invest in the business.

Understood. And then the comments around the backlog for advisors sounded pretty similar to what we've heard from previous quarters. I was hoping to get a little more context maybe around numbers for retention in the period. And then I think the larger books of business coming on board maybe talk about the size today that you're recruiting, average size versus say a year ago?

I think that both of those are up is that the biggest change probably over the last few years is a fewer advisors in total but much, much bigger books. So not only was this year an onboarding of probably the largest books we ever have but also the same in the pipeline. So we've become a destination for very large teams. I think both because of our technology platform and our high net worth offerings over the last couple of years that we've developed have really taken off and made us a destination. So we're very comfortable not only do we have a very good recruiting year but we're very comfortable with the backlog that's in there too.

Great. Thank you.

Your next question comes from the line of Devin Ryan with Citizens JMP. Please go ahead.

Thanks very much. Hi, Paul, Paul and welcome, Butch. First question just on – coming back to the balance sheet just lending capacity as demand picks up here. So you have obviously plenty of capital. You seem to be holding at least a couple of billion dollars of excess liquidity on the balance sheet. Then I think you have $18 billion of cash at third-party banks. So I appreciate, this isn't going to happen overnight and you're not going to force the lending, but how you would frame the amount of loan growth that could come from just remixing the current balance sheet? And then how much of that third-party cash you guys are comfortable moving on to the balance sheet over time with the assumption that deposits are stabilizing to maybe starting to grow a bit here?

Well, Devin you answered the question just by giving the stats we have a ton of cash and capital. And I think that what's limited our growth on -- is just we've been very consistent in our risk appetite and having low risk on the C&I side of the portfolio and just the spreads and the demand haven't been there. They're just -- I think a lot of that is as Paul talked about earlier because of lack of M&A activity. Certainly the opportunities to lend at the spreads and the risk tolerances we like haven't been there. But we're more unwilling when that returns to invest in them. So that's holding it back there. On the other side the SBL loans as rates went way up and mortgages as rates went up it just cooled the appetite. Now that we've seen even after just the 50 basis point drop we've seen a pickup in SBLs right away. I think people have gotten used to the rates and figured they're going to be aroundish to stay and they are floating. So if they -- the SBLs when they go down the rates will go down and clients seem to be more active. So we're waiting on the commercial side to see a risk/reward in terms of spreads and the risk part we like and are comfortable with. And on the client side for SBLs and mortgages it's really their appetite. We're here and ready and we have plenty of cash. So we're not trying to limit the bank growth seen over the years we'll have quarters whether we've had fairly sizable growth and then quarters where we've had none just based on really what we think that market risk appetite is.

Thanks, Paul. I appreciate that. I guess where I was going was more that you have $18 billion of third-party cash you want to have some liquidity parameters there I'm sure for risk management purposes. So like are you comfortable moving $5 billion of that or $10 billion of that? Like what's the threshold that we should be looking at? I know there's been thresholds over time. So just curious how you guys think about that and where you're comfortable.

Well, I mean, the major thing that drives that is we offer clients FDIC insurance up to $3 million through the multi-suite program. And so we want to make sure that we avail our clients to those third-party banks to maximize their FDIC insurance. Not a lot of other firms do that anymore especially firms with affiliated banks. And so we think it's important to protect to give that client that type of protection. And so that would limit all $18 billion for example to being deployed in our own bank probably would limit half of that I would say something in that range from being deployed to our own bank to give the clients the FDIC insurance that they could get to the multi-suite program.

Got it. Okay. That’s great color. Thanks, Paul. And then a follow-up I'd love to ask about fixed income brokerage. I think performing reasonably in an environment that's been challenged. I think you guys highlighted starting to see some light at the end of the tunnel with depository clients. So just trying to think about where we could go from here. If there's a kind of a framing of whether it's historical levels of revenue? Or how we should think about like how maybe much that part of the business is under punching relative to its potential if liquidity builds in the system and banks are more active? Like just where that could go relative to where we currently are?

I would say the periods during COVID with very low rates. Those were kind of record levels for fixed income brokerage and it was a perfect environment for that business. There's lots of excess cash in the system, there is -- short-term rates were close to zero and there is benefit for taking on some duration. And so somewhere between kind of where we've been running in the last couple of years in COVID is probably a reasonable place to kind of think of a healthy level would be over time. And then of course as we grow the business and we take market share and we grow tangential opportunities like Sumridge has been a great addition beyond the depository spaces that diversifies and further strengthens our business as well. So we'll continue to look to add to our capabilities and also our balance sheet is getting bigger. So over time we'll also use our balance sheet in a very prudent way to continue supporting that business as well. So it's still a growth business for us over time. But just from the pure depository space the COVID period was sort of a the components of that business were sort of perfectly aligned.

Yes, got it. Okay, that’s helpful. Appreciate you taking all the questions.

Thank you. Your next question comes from the line of Brennan Hawken with UBS. Please go ahead.

Good afternoon. Thanks for taking my questions. So, I wanted to ask about advisory. So, it's one of the themes we've been noticing and has been sort of nagging has been that sponsors have been sort of slow to reengage. But I know your advisor business has a lot of leverage there and certainly encouraging to see that strength. So, hoping you could get maybe a little more color around what you're seeing. Is this a good sign that sponsors are beginning to reengage in the mid-market space? Or were there some lumpy results that benefited the revenues?

I think there's a general reengagement and across a lot of sectors. So, it's a sign. We've always been I guess pretty conservative on our outlook there when any time we talked we talked about a backlog, but the market wasn't conducive. We're seeing people engage. And it's not only on inventory I mean existing things that were up for being sold but we're seeing new engagement and discussions about new mandates. So, we think -- I'm not going to say it's going to boom overnight, but we're seeing a much, much more conducive market both in interest on buyers and sellers. So, at least for the near term we see a fairly good market and recovering market. But I don't know if we can give you more color because one quarter doesn't always paint a long-term trend but we can tell you the backlog looks pretty good for the near term anyway.

That’s fair. Thanks for that Paul. And then ESP given where the yields were on that product I would expect that in the recent Fed cut that had a very high beta. Should we just assume that that's a roughly 100 beta product as we see cuts? And have you noticed any change in behavior or engagement since yields have started to come down around that offering?

I would say ESP balances are higher yielding balances sort of at the same rate range as money market funds. So, that is typically a 100% deposit beta type product. And we have others we have balances and opportunities and certain balances in the bank segment as well. In total, when you look at our total balances at the bank segment deposits the bank segment and the suite balances roughly half of those balances are of highest -- higher rate higher deposit beta type balances. So, we have a lot of protection to downside rates which will give us some offsets as rates decrease because our assets are mostly floating rate assets. And what was the other part of the question?

Any changes in engagement with those higher yield products as we've seen rates come down?

Not really. I think a lot of the cash reinvestment activity we are slowing down and decelerating well before the rate decrease. And so we haven't seen sort of an acceleration or deceleration frankly that's notable following the decrease.

Okay. Thanks for taking my questions.

Thank you. Your next question comes from the line of Steven Chubak with Wolfe Research. Please go ahead.

Hi good evening Paul. Good evening Butch. I wanted to start with a question just on the spread revenue guide for next quarter. Now, the growth in sweep deposits was encouraging even inclusive of the fee billings. Just wanted to drill down to some of the inputs that are underpinning that lower spread revenue guide? Maybe more specifically just what deposit pricing changes are embedded in the guide? And does it contemplate any favorable cash seasonality which we typically see around year-end?

Yes, I mean we've been accused of being conservative with our guidance in the past particularly on this guidance. So, hopefully that proves to be the case this time around because loan balances are continuing to grow. We're not really factoring in ongoing loan balance. This is more of a snapshot type view in terms of what the full run rate of rate changes would be to both the BDP fees and NII. And so, to your point, balances can increase throughout the quarter whether it’d be cash balances but hopefully more loan balances and that could offset some of the reduction in rate and the sensitivity around that. And I just gave you the breakout of the deposits that are higher yielding and higher deposit beta versus the ones that are lower yielding lower deposit beta. And so that's kind of what went into our math.

Understood. And for a follow-up just on, I wanted to drill down to some of the earlier comments you made on net new asset growth in the pipeline. For both you and industry peers, this past year we did see the moderation in industry flow trends. I understand you struck a positive tone in terms of the pipeline of new advisors but just trying to gauge what drove the slowdown in industry growth, whether we should interpret the comments on the pipeline as supportive of an acceleration in that flow rate? And which channels are seeing the fastest growth across the platform given the omnichannel offering?

It depends on how you want to look at it in our RIA part RCS, it's by far the highest percentage growth and is consistent with industry trends and that's been growing quickly. If you look at total dollars and this goes back and forth a couple of years ago, it was independent this year the employee channel really led the way. And it's -- we used to have -- independents grow faster than down markets, I mean in up markets and employees and slow markets. We don't see that trend anymore. It's really just where we can meet the teams that like an affiliation option. And so, employee led the way. I actually think that we'll get some improvement in the independent contractor model, because it's just cyclical. And the employee size seems to have a very good backlog as does RCS. So, we're encouraged. But it's a process both to get people to commit and then get people in the door. So we can never predict the timing but we're encouraged even with the great results that we could do better.

Helpful color. Thanks for taking my questions.

Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.

Hey, guys. Good afternoon and Butch welcome to the call as well. I wanted to follow-up to Steve's question around cash trends. Is it possible to unpack sort of sources of growth you saw in the third quarter, your fiscal fourth quarter across the cash stack, and curious whether it is really kind of abating of the sorting? Or are you starting to see more cash coming on to the sidelines as net new assets coming in?

I mean we continue to grow a lot as a business. And as we grow and bring on new advisors they bring on their clients, they're going to bring on their clients cash balance. And so -- and that's been happening throughout the last couple of years has just been masked by the fact that there's been a lot of reinvestment activity. And so, as that reinvestment activity decelerates and subsides then you're going to start seeing the pure -- the growth coming in from the addition of advisors and their clients.

Yes. That makes sense. So your point is kind of like look from this point on like your cash balances are likely to grow and trend more in line with net new assets like we've seen in the past?

Well, you took my comments a couple of steps further but I'm not sure we're willing to declare a total end to the cash reinvestment but that's the dynamic that you've seen over the last, call it, four to six quarters as that dynamic has decelerated.

Got you. Okay. Good enough. Thanks. And then a quick follow-up on the buyback. I just want to make sure I'm interpreting your comments correctly. So, $300 million share repurchases this quarter a nice step-up. Should we assume that to be kind of run rate quarterly pace of buybacks from here as well or absent, obviously, like M&A or anything like that? And if there are opportunities to do more, you're likely to do that as well? I'm just trying to understand what the criteria are from here for trajectory of share repurchases.

I mean to your point, we'd much rather use the capital to grow the business whether it's through organic growth acquisitions or balance sheet growth with loan growth. And we are optimistic on those fronts as well. But to the extent that we're not using the capital and we're generating pretty good earnings then we want to make sure that we limit further expansion of the capital ratio. And that's where we come up with the pace that we've been out here for the last quarter or maybe even a little bit more, depending on all those factors and price and other things that we want to show our commitment to limiting further capital ratio growth given how strong it is now and it is over our target of 10%.

Yeah. Make sense. All right. Thank you guys.

Your next question comes from the line of Bill Katz with TD Cowen. Please go ahead.

Good evening. Just coming back to the margin discussion. Just wondering, if you could unpack a little bit from the top-down view of driving operating leverage to maybe the segment lines. So if I look at maybe the private client business and the capital markets business in particular, the margins there improved reasonably strongly particularly in capital markets. So how do we think about the marginal margin in those segments? And then coming back Paul to your comments, Paul Shoukry your comments of 22% margin is pretty fulsome at this point. So how do we think about the incremental margin at the segment level and then that translating into the overall margin outlook for holdco? Thank you.

How many more hours do you have tonight? Yeah, I mean I think listen to the extent that revenues grow in our segments then that should result in margin expansion for each one of our segments. So interest rates and spreads play a big role in that both at the private client group segment and the bank segment. And we just had a 50 basis point reduction. Now I think we can over time offset that impact by growing the balance sheet at the bank as loan demand comes back. So over time I think we can do that. And then to the extent capital markets margin improved this past quarter, but it hasn't been exactly great the first three quarters of the fiscal year. So the incremental margin when you're operating at a loss is pretty significant especially with the significant revenue increase we had in the segment this quarter. So I'm just saying over time what I caution the Street from doing is just assuming that the margin gets better in every segment because everything goes in the right direction and then that generates a substantially higher margin than we generated this year. I think that's maybe not factoring in the puts and takes that are natural and are diverse and complementary businesses.

Okay. That’s helpful. And then just one follow-up just coming back to client cash for a moment, sort of, seen this as some of your peers you've seen a big pickup in client cash into the end of the quarter and some have pointed to just some fixed income liquidity maturities coming in, some uncertainty around interest rate expectations given some of the moves by the Fed, and obviously election coming up in just a couple of weeks from now. So are you seeing a structural shift in the client cash? Or is this more of a timing element on asset allocation that is somewhat pumping up client cash all else being equal and could move back into more AUM type of levels and not so much on the NII side? Thank you.

I would say our asset mix has been remarkably consistent. Advisors have been doing a very good job through different cycles both market cycles and rate cycles, keeping client's asset mix relatively aligned with their long-term investment objectives. And so like for example equities for us right now is roughly 60% on an ex-rate basis of assets and that's been consistent within two or three percentage points for the last several years in various environments. And so the mix shift that you've seen over the last five years has really been within the cash category when it's a low rate environment there's more in transactional cash. And when you're in a higher rate environment there's more investable cash there. And so that's the only shift I think we've seen over the long-term. And one quarter -- the difference I think in just the last couple of quarters is the deceleration I talked about of the sorting activity. And now you're starting to see more of that growth coming in from just bringing on advisors as they bring on their clients and existing advisors bring on new clients.

Okay. Thank you for the perspective and taking the questions.

Your next question comes from the line of Kyle Voigt with KBW. Please go ahead.

Hi, good evening. Paul, you noted a continued focus on corporate development efforts and remaining disciplined there. Just curious if you can give us an update on the M&A environment. Are you seeing more or less opportunities today compared to earlier in 2024? Is the rate certainty helping to narrow bid-ask spreads for potential targets? And any areas of focus we should really be thinking about in terms of the Wealth segment? Or are there other areas you're considering for inorganic growth?

Yes, we look across all of our businesses for growth. We really believe we're positioned for the right opportunities to grow. And I'd say, our corporate development team has done a great job of bringing opportunities to us, right? So, we look at a lot of deals. Some, we just don't like the deals, the way they fit in our environment, some are not culturally there. And some we like, and we just can't get the terms on what we think is the long-term price. So, we're constantly looking, we take them very seriously. We're, as you know, a conservative buyer and that will be competitive, but we won't stretch way out to buy an asset. And so it really just depends when they click, and that's the hard thing on timing. Like a few years ago, people say, well, you guys aren't going to buy anything. You're hoarding all this capital and we closed four deals in the next few months. I mean, it just took a while, and they just all happened to hit around the same time. So, we're still in that mode, but we're not going to do a deal just to do a deal. It has to be something that fits and makes sense for the firm and shareholders.

Makes sense. And for my follow-up, maybe just a question on the balance sheet. On the AFS portfolio, I know that continued to run off in the quarter. I guess, with some more clarity on the rate environment in terms of the direction of travel with the Fed and still with significant excess capital. Is there any desire to change your stance on that and begin holding that steady or growing those balances in fiscal 2025? Or do you anticipate letting that portfolio continuing to run off?

Yes. We let that portfolio grow modestly just really to accommodate client cash balances when the banks during the COVID period didn't really want those balances. And so now all we're doing is getting back to sort of a normalized liquidity level at both banks and primarily at Raymond James Bank, where we were accommodating those balances. So once they get to that normal state, then we'll maintain the balance for the securities portfolio. Banks typically need to run at maybe around the 10% to 15% liquidity ratio between cash and securities. And so Raymond James Bank is still well above that. And so we'll let those securities run off, and then once they get to that type of range, then we'll maintain the balances. But the point is we're not taking bets on duration, we're not taking bets on where the Fed may or may not take rates. That got a lot of our peers in trouble. And so we want to just stay focused on serving clients and keeping the balance sheet as flexible as possible for anything that the market or the interest rate environment may bring us.

Thank you.

And your next question comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.

Great. Thanks for taking the questions. I wanted to ask about the PCG business [indiscernible] you elaborate on how that's performing and contributing across Canada and the U.K. today? I know you've done some acquisitions there over the years. Just curious what you're seeing in terms of organic growth contribution over the past year versus, say, fiscal 2023? And then Canada and the U.K., maybe you could talk a little bit about some of the initiatives there to accelerate organic growth and improve scale and profitability?

It's a little bit of tale of two cities for different reasons. But the Private Client Group in Canada is doing great growth in recruiting. When we acquired that business, it was really a capital markets business and with the small PCG business and today, it's a very strong like -- similar to the U.S., really a big capital Private Client Group base continuing to recruit similar profit margins, good growth. Same kind of platforms that we have here in the U.S. where you have AdvisorChoice and they've executed very, very well to where we're really getting to the size of the smallest to the largest banks, which is quite unusual in Canada, but we are up there. We feel like a Canadian firm. They just have a U.S. parent, but they operate very, very well. The U.K., because we've done a recent acquisition are still in integration. The growth has been kind of flat. And that as we get people and systems and everything really hooked together and going through that integration process, the growth is much slower, but we anticipate once we're able to do that and get the integration we expect to be able to grow there, but it's a smaller business too. So, we won't have as big of an impact consolidated.

Great. Thanks. And just on the RCS business, maybe you could help remind us just in terms of the economics there, how that compares to your traditional channel say for $1 billion of assets. Just maybe, you can walk us through the P&L impact across revenue [indiscernible]? Thanks.

Yes. What we've disclosed so far, so maybe it's something we covered at Analyst Day or something, we haven't really disclosed in detail, but we really get an asset fee there. So if you looked at pure RIA, the way they measure margins, they're higher margins. If you look at our net on basis points on assets, are lower. So, part of the service model is different too. You don't have all the supervision and compliance requirements that an RIA has those responsibilities or certain things that they do. They are clients of ours, their clients are their clients, they're not our clients. And outside of some AML responsibilities and just oversight to make sure they have a process. There's a lot less cost that goes into it, although, we're a higher service model. So it's not easy to give a quick answer, but it might be something that we can show in more detail at maybe the next Analyst Day.

Just any sense ballpark, directionally PBT margin, revenue ROCA, just how to think about that versus the firm or versus [indiscernible]?

Yes. It's complicated. Again, as Paul said at Analyst and Investor Day, would be a good time to talk about the margin, on a P&L basis is actually higher, because the attachment revenue that you book is much lower whereas in our other businesses, we gross up the revenues pre-payout. And then the ROCA just varies dramatically depending on the asset mix that the RIA has and the pricing structure, because there's different pricing structures depending on the RIA as well. So, we can get probably more time than we have now to discuss, but Analyst and Investor Day is probably the right forum for that.

Great. I look forward to that. Thank you.

Thank you.

Great. Well, we appreciate everybody's attendance and we're very proud of the quarter, but we're already working on the next quarter because that's just what we do here. And Butch has done a great job, and we've had a great transition and we'll continue to do that over the next year. So appreciate you joining us and we'll talk to you next call.

Thank you. And this concludes today's conference call. Thank you all for participating. You may now disconnect.